The Anatomy of Board of Director Culture

November 24, 2011 • Corporate Governance, LEADERSHIP, Strategic Spotlight

By Patrick R. Dailey

Culture matters more than before. Unless the right board culture is in place, nothing very special is likely to happen.

Talented directors sit shoulder to shoulder around a board table, razor-focused on their company’s strategic imperatives guided by a superb Chairman at the helm, but unless the right board culture is in place, nothing very special is likely to happen.

Today, culture is a more critical determinant of board effectiveness than during the bygone era of ceremonial board service. Why? Because contemporary boards function as deliberative, working teams rather than simply preside. The cultural ground rules which dictate director attention, behavior, risk appetite, and decision-making processes are simply more critical to a board’s effectiveness because boards are more at work than before.

It is a mistake to fail to understand the strength and focus of your board’s culture. Constructive culture foster constructive working dynamics; dysfunctional cultures are no longer benign annoyances; they are often destructive to shareholder value as can be seen from the impact of boards including AIG, News Corp., Hewlett-Packard, Yahoo, and recently Avon.

The aim of this article is to explain board culture in simple language. The article describes the implications of board culture on director selection, board dynamics, decision-making, and board development. It is argued that increased knowledge of culture along with greater attention and better tools for board evaluation/renewal will improve board dynamics and decision processes. Ultimately, shareholders benefit from more astute, unified board leadership.

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